Bought a Bargain Property: Now What?

We have recently purchased a property at a very good price at $330,000. There are three choices we could make and they are driving us a little crazy. My wife and I have been talking about the choices and we have decided to put the decision off for a few weeks. But we will have to decide within the next few months and again the indecision on our part is driving us nuts. Tough choice to make.

The Situation

The deal was found out of sheer curiosity. The market in my neighborhood is hot and most homes sell within 30 days. I noticed that there was one home that had passed 100 days on the market. I wanted to know why and quickly set up an appointment to go see it. The home was fundamentally sound but everything was out of date. It had original worn cabinets, stained concrete flooring that was not conventionally appealing, and the areas with carpet was worn and stained. They priced it well for the condition at a reasonable $425,000. Why didn’t it sell at that price I have no idea but buyers did not want to touch it. I did but at a lower price. The roof, HVAC, and water heater were less than 5 years old. The foundation was sound.  When I negotiated it down to $330,000 it became a treasure. It was pure luck my offer got accepted. Now we have some choices to make.

The Choices

Choice A is to flip the property. Remodeled comparables in the same neighborhood are selling for about $500,000-$550,000. I can budget holding costs and a remodeling budget of $70,000 bringing my total cost to $400,000. If it sells at its market value after the remodel the profit margin would be between $80,000-$130,000 after all expenses!!! It is definitely tempting to just flip it and make a quick profit.

Choice B is to keep it as a rental. Since it was already bought at a bargain price we would have instant equity now and into the future adding to my net worth. The property can lease out for a range of $2700-$3000 once the remodel is finished. However, by keeping it I will have to swallow all the repair costs..that means I will have to be paying off the line of credit I am using for repairs in the foreseeable future. The rent will cover that costs along with the mortgage but I will not be getting that much passive income.

Choice C is to move in to the property and lease out our current home. The house feeds to the same schools my kids go to, has a floor plan that works for us, and is similar in square footage to our current house. If I flip it right away the profits will be taxed as ordinary income. However if we live in it for 2 years the profit becomes tax free.  The government allows homeowners to keep up to $250,000 in gains for individuals and $500,000 for married couples if they live in a house at least 2 years. By being patient we can flip it in 2 years and not pay taxes on the gain. If we like it enough we can just stay there. But again, similar to keeping it as rental, we would have to continue to pay the $70,000 loan for repair costs until we can re coop it back if we sell in 2 years or for a longer period of time if we decide to stay longer.

All three choices have positives and negatives. The ones that make more sense to me at this point is choice A and choice C more so than choice B. My wife and I will be discussing some more in the upcoming days. What a predicament?  What would you do?

Abandoned Vehicle on Fourplex

A few days ago I was at home in the late evening laying on my bed… reading the news of the day on my phone like most adults out there in the world do at that time.  All of a sudden the phone rang and it was one of my tenants letting me know that there was a car in the small parking lot ON THE PROPERTY that has been there for several days and they had no idea who it belonged to. What do I do in this situation? Do I call the cops or towing company?

.abandonedcar

The next morning I drove out to the property. A few blocks from my destination I saw a police officer on the side of the road. My decision whether to call the police or the tow company was decided for me by fate. I waved at the officer and he came out of his vehicle. Once we were within talking range, the situation concerning the abandoned vehicle was explained and he ended up following me to the property.

Once there he ran a check on the vehicle. The vehicle came out clean. It was not involved in any robbery, murder, rape, and it was not a stolen vehicle. I knew then he wasn’t going to remove the vehicle. He explained since the vehicle check came out clean he really couldn’t do anything to help. Then I realized my biggest mistake of all. I should have been carrying donuts. A juicy glaze donut given to the officer for sure would have been enough of a bribe to have the vehicle towed out. He left and abandoned me like the vehicle I am trying to get rid of and Plan B came into effect. I called the tow company immediately. I told them I wanted the vehicle towed right now and they explained to me they couldn’t for the three reasons below:

Reason 1: I need to have a sign post that is 5 feet tall with a standard towing sign.

Reason 2: I also need to have a barrier like concrete stoppers, gate, or something similar separating my parking lot from the fourplex next door. (Texas Regulation per Towing Guy Conversation)

Reason 3: I needed to first do reasons 1 and 2 then wait 24 hours.

Quite a bit of work. But once I do all three they will tow whatever vehicle violates the new towing ordinance for FREE. Now going through all three steps could take up to a week or I could start knocking on doors at the fourplexes nearby to see who has any information about this vehicle. I started knocking on doors.

I knocked on a unit next door and there was no answer. On the next one somebody answered. I asked about the car and luck was on my side when she said the car was her brother’s. Apparently, the car just needed a battery and he had left it there until he bought a new one. Why he left it there on my property was not revealed and I didn’t ask. I just asked for it to be moved–that was the goal at the moment. She called his brother and he came with a new battery within the hour and problem solved! I didn’t have to tow and her brother didn’t have to pay $300 to a towing company to get it back. Taking a little time knocking on stranger’s doors paid off. And by the sound of the car…I think the brother bought a lemon…oh well.